Oil prices narrowly mixed

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Oil prices were narrowly mixed on Monday, after heavy losses last week, as the market tried to get a fix on what the eurozone debt crisis is going to mean for overall economic growth, dealers said.

A stronger dollar put pressure on prices since oil is sold in the US unit.

New York's main contract, light sweet crude for delivery in July, was up 28 cents to 70.32 dollars a barrel.

London's Brent North Sea crude for July was down 28 cents at 71.40 dollars.

The euro dipped to around 1.24 dollars on Monday, down sharply from Friday levels well above 1.25 dollars, as the eurozone crisis cast a shadow over the outlook of the shared European currency.

A stronger US unit makes dollar-priced crude more expensive for buyers using weaker currencies, denting demand, which leads to lower prices.

Oil plunged last week, nearing 10-month lows, as traders worried about the eurozone crisis, weak US unemployment data and falling global share prices.

Oil market analysts said that supply still outweighed demand, while the European debt crisis remains a key concern for investors.

"Globally we still have very high product and crude stock, and not many signs that demand outside of China is really strong," said Jason Feer, vice-president of Argus Media energy market analysts.

Victor Shum, senior principal of energy consultants Purvin and Gertz in Singapore, said oil prices are likely to remain subdued.

"I think it's going to take some time for investors to regain confidence. Given the financial turmoil in Europe, it's unlikely for oil to rebound quickly," Shum said.

The Centre for Global Energy Studies said meanwhile that the global economic recovery would benefit from a period of oil prices below 80 dollars given the growing risk of a fall back into recession,

The London-based consultancy noted that in the space of four weeks, optimistic views on the economy have "reversed and the market now seems fixated on the risks of a double-dip recession."

Oil prices are down 17 percent over that period, with the eurozone debt crisis raising tough questions about the impact on the economy as governments slash spending to balance their books, it said in its latest monthly report.

CGES warned that strong growth in China and Asia could be under pressure and "questions are beginning to be raised as to whether this is sustainable in the absence of a recovery in the region's main export markets in Europe and North America."

"A slowdown in the rate of Chinese economic growth would remove at a stroke the single largest support of oil demand," it added.

Elsewhere on Monday, oil giant BP faced mounting pressure to get control of a massive oil slick in the Gulf of Mexico from a leaking well after the US government threatened to take over the response to the month-old environmental disaster.

"If we find that they're not doing what they're supposed to be doing, we'll push them out of the way," US Interior Secretary Ken Salazar said.

© 2010 AFP

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